Managerial Accounting
Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 9, Problem 3TIF

Variance interpretation

Vanadium Audio Inc. is a small manufacturer of electronic musical instruments. The plant manager received the following variable factory overhead report for the past month of operations:

Chapter 9, Problem 3TIF, Variance interpretation Vanadium Audio Inc. is a small manufacturer of electronic musical

Actual units produced: 15,000 (90% of practical capacity)

The plant manager is not pleased with the $12,320 unfavorable variable factory overhead controllable variance and has come to discuss the matter with the controller. The following discussion occurred:

Plant Manager: I just received this factory report for the latest month of operations. I’m not very pleased with these figures. Before these numbers go to headquarters, you and I need to reach an understanding.

Controller: Go ahead. What’s the problem?

Plant Manager: What’s the problem? Well, everything. Look at the variance. It’s too large. If I understand the accounting approach being used here, you are assuming that my costs are variable to the units produced. Thus, as the production volume declines, so should these costs. Well, I don’t believe these costs are variable at all. I think they are fixed costs. As a result, when we operate below capacity, the costs really don’t go down. I’m being penalized for costs I have no control over. I need this report to be redone to reflect this fact. If anything, the difference between actual and budget is essentially a volume variance. Listen, I know that you’re a team player. You really need to reconsider your assumptions on this one.

Assume you are the controller. Write a memo responding to the plant manager.

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Chapter 9 Solutions

Managerial Accounting

Ch. 9 - Direct materials variances Bellingham Company...Ch. 9 - Direct labor variances Bellingham Company produces...Ch. 9 - Factory overhead controllable variance Bellingham...Ch. 9 - Factory overhead volume variance Bellingham...Ch. 9 - Standard cost journal entries Bellingham Company...Ch. 9 - Prob. 6BECh. 9 - Crazy Delicious Inc. produces chocolate bars. The...Ch. 9 - Prob. 2ECh. 9 - Salisbury Bottle Company manufactures plastic...Ch. 9 - The following data relate to the direct materials...Ch. 9 - De Soto Inc. produces tablet computers. The...Ch. 9 - Standard direct materials cost per unit from...Ch. 9 - H.J. Heinz Company uses standards to control its...Ch. 9 - Direct labor variances The following data relate...Ch. 9 - Glacier Bicycle Company manufactures commuter...Ch. 9 - Ada Clothes Company produced 40,000 units during...Ch. 9 - Prob. 11ECh. 9 - Direct materials and direct labor variances At the...Ch. 9 - Flexible overhead budget Leno Manufacturing...Ch. 9 - Prob. 14ECh. 9 - Factory overhead cost variances The following data...Ch. 9 - Thomas Textiles Corporation began November with a...Ch. 9 - Prob. 17ECh. 9 - Factory overhead cost variance report Tannin...Ch. 9 - Prob. 19ECh. 9 - Prob. 20ECh. 9 - Income statement indicating standard cost...Ch. 9 - Prob. 22ECh. 9 - Prob. 23ECh. 9 - Rosenberry Company computed the following revenue...Ch. 9 - Lowell Manufacturing Inc. has a normal selling...Ch. 9 - Shasta Fixture Company manufactures faucets in a...Ch. 9 - Flexible budgeting and variance analysis I Love My...Ch. 9 - Direct materials, direct labor, and factory...Ch. 9 - Factory overhead cost variance report Tiger...Ch. 9 - CodeHead Software Inc. does software development....Ch. 9 - Direct materials and direct labor variance...Ch. 9 - Flexible budgeting and variance analysis Im Really...Ch. 9 - Direct materials, direct labor, and factory...Ch. 9 - Factory overhead cost variance report Feeling...Ch. 9 - Prob. 5PBCh. 9 - Prob. 1COMPCh. 9 - Advent Software uses standards to manage the cost...Ch. 9 - Prob. 2MADCh. 9 - Prob. 3MADCh. 9 - Prob. 4MADCh. 9 - Ethics in action Dash Riprock is a cost analyst...Ch. 9 - Variance interpretation Vanadium Audio Inc. is a...Ch. 9 - MinnOil performs oil changes and other minor...Ch. 9 - Marten Company has a cost-benefit policy to...Ch. 9 - Prob. 3CMACh. 9 - JoyT Company manufactures Maxi Dolls for sale in...
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